Many investors get excited when the market is going up. After all, that's when you make money, right?
While that may be true, I tend to get a little despondent as the market climbs because I know that bargains are steadily disappearing. And -- if you ask me, at least -- investing success comes from finding and buying stocks at prices below what they're actually worth. When I'm able to do that right, everything else usually takes care of itself.
Well, we've got a serious rally on our hands right now. Not only have we seen huge gains from the 2009 bottom, but the S&P 500 has tacked on more than 20% over just the past few months. The 10-year average price-to-earnings multiple that professor Robert Shiller tracks has now climbed above 23, which, no matter how you cut it, is not cheap.
But there are still stocks out there worth buying right now. Here are three favorites of mine that are not only still value-priced, but they all pay you to own them.
Intel (Nasdaq: INTC)
Those who keep score may know that I've been beating the drum on this one for a while. Intel's stock wasn't the best stock for 2010. It wasn't even close. Actually, short-term investors might say that it was a pretty lousy stock to own in 2010.
But Intel the company was a pretty different story. In 2009, the company delivered $8.6 billion in operating income on $35 billion in revenue. In 2010, it churned out $16 billion in operating income on $44 billion in revenue. In 2009, investors were paid $0.56 per share in dividends, while in 2010 they were handed 12.5% more (or $0.63 per share).
The stock currently trades at just over 10 times trailing earnings, and you'll have to go all the way back to 1994 to find the last time it traded at such a low multiple. It spent the entire past decade working off an absurd valuation from the dot-com bubble, but after that 10 years of treading water, it's now at a very buyable price.
Abbott Labs (NYSE: ABT)
This is another stock that I've been bullish on for a while and has done exceedingly little for its investors. Frankly, Abbott's case is a bit of a head-scratcher. Of the 23 analysts who have ratings out on the stock, 15 rate it either "buy" or "outperform." Nobody has the stock at less than a "hold." Members of the Motley Fool's CAPS community have been similarly positive, giving the stock a perfect five-star rating.
So what gives? My take is that the stock is being held back by its industry and investor laziness. Many of the companies Abbott might be stacked against -- for instance, Pfizer (NYSE: PFE), Merck (NYSE: MRK), and Eli Lilly (NYSE: LLY) -- are pure-play pharma companies that are facing, at best, much slower growth due to major patent expirations. Abbott has a much more diversified business than these pharma competitors and faces much less patent expiration risk.
To the extent that investors simply lump Abbott with the rest of big pharma, the stock may not get quickly revalued to a price closer to what it's likely worth. I think many investors are so laser-focused on the macro-picture that they're too busy flipping ETFs back and forth to worry about bottom-up analysis and finding individual bargain stocks. I think that's an opportunity for investors who pick up Abbott while it's trading at just over 10 times forward estimates and yielding close to 4%.
DPL (NYSE: DPL)
DPL is the owner of DP&L, a supplier of electricity to more than 500,000 retail customers in west central Ohio. The reasoning behind looking at utilities is very simple -- in his rush to push up stock prices, Mr. Market completely overlooked this sector. As a result, investors can currently buy DPL for less than 11 times forward earnings and collect a 4.6% dividend.
In making this pick I debated between DPL and Exelon (NYSE: EXC). I went with DPL because I like the company's stability. DPL's revenue is primarily steady retail business, while Exelon derives more than half of its revenue from its generation and wholesale business. However, it's still a bit of a toss-up; Exelon's stock is slightly cheaper and has a slightly higher dividend yield, and the company owns a significant amount of nuclear power generation. DPL relies primarily on coal-fired plants.
Be a watcher
If any of the pitches above have whetted your appetite, I encourage you to dig in further to figure out whether these stocks could boost your portfolio. While you get jiggy with your research, be sure stay up to date on what's going on with these stocks. You can add Intel, Abbott Labs, DPL, and (why not?) Exelon to your Foolish watchlist.
If dividends are your bag, then you don't want to miss my fellow Fools' top 13 high-yield stock picks. You can download the free report here.
